BY JUSTIN FARMER
Whether you have started a law practice and are looking to expand rapidly or are thinking about leaving a large firm and venturing out on your own, buying a law practice may be right for you. Regardless of where you are in your career, it can be much easier (and more cost-effective) to buy a law practice than it is to start one on your own. Many attorneys do not even consider purchasing a law practice because they do not realize they can, or they do not know where to start with the process. However, buying a law practice is both possible and a great avenue to pursue for the savvy business person. Below are a few things to consider if you are thinking about starting your own practice by purchasing a practice.
1. FIND LAW PRACTICES FOR SALE
You cannot purchase an existing law firm if you cannot find one for sale. Unlike real estate, you will not find a “For Sale” sign outside of a law firm, even when the owner of the firm wants to sell the practice. So how do you find a firm that you can purchase? One organic path is to network with older attorneys who may be looking toward a transition soon. You can also look at registries created for this niche, such as Private Practice Transitions, BizBuySell, or the WSBA Career Center. Some registries even provide support by making experts available to answer your questions.
2. CONSIDER THE PRACTICE TYPE, CLIENT BASE, AND BRANDING
Of course, you do not want to buy a commercial law firm if your area of practice is personal injury. To ensure that you target the firms that most align with your experience and goals, you need to first consider your long-term goals, what type of attorney you want to be, where you want to practice, and in what area or areas of law you want to practice. If you do not yet have an area of law to which you have dedicated your practice, consider your personality, your interests, your values, the learning curve to be successful in a certain type of law, and, honestly, whether you have the dedication and drive to absorb a new practice focus.
Similarly, it is important to review the existing clients of the firm for sale to gain an understanding of the needs being met and whether those clients seem like ones with whom you would have good chemistry.
3. DO YOUR DUE DILIGENCE
Due diligence can and should be extensive. You should review financials, tax returns, and cash flow projections, and meet with the owners and key staff. While making the decision to purchase a firm is an important first step, due diligence will be the most time-consuming and enlightening step in actually purchasing and taking over a practice. When conducting your due diligence, you should assemble a purchasing team that includes your financial advisor (to address whether and how the purchase of the firm will help you with your long-term financial goals), your CPA (to advise on the tax benefits of purchasing a law firm), and an advisor who can help you with deal structure (asset purchase versus stock purchase versus asset purchase treated as a stock purchase?). These professionals will help you identify, request, and review the relevant materials and documentation about the seller. You will then be able to utilize this information to draft a final purchase agreement so that you can move forward with the acquisition and proceed with closing.
4. CREATE A TRANSITION PLAN
After the sale, there will be a transition period. Think of it as a new business and, as with any new business, there must be a business plan. While the transition occurs after you purchase the practice, planning for that transition should occur well before the purchase (i.e., during the due diligence phase). The business plan should include a detailed (yet organic, as things can change) checklist of items that you will need to work through, including:
- Production (who will be responsible for what work and at what level moving forward);
- Firm management (hiring, firing, vendor management, lease negotiations, technology, and marketing plans); and
- “Everything else” that the former owner was responsible for, which you will now be handling.
The business plan also must be flexible enough to adapt to the changing business environment. During the transition phase, the seller should transfer the knowledge base, key clientele, referral networks, and other elements to give you the best chance of success in your new firm.
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MORE ONLINE > Additional information about how to buy a law practice is available at www.wsba.org/for-legal-professionals/go-solo/buy-a-practice.